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Cloud adoption in India

Infrastructure as a Service (IaaS)

Trends and perceptions in the Indian market


Foreword
The cloud computing Infrastructure as a Service (IaaS) market is at a nascent stage both
globally and in India. Across industry segments, the Indian market has shown significant
interest in the potential of IaaS services. Virtualization, often seen as the first step in a
cloud strategy, has begun to be more widely implemented across Indian data centers.
Related markets such as Software as a Service (SaaS) is experiencing increased
adoption and this can be expected to contribute to a more rapid implementation of the
IaaS concept. However, there are significant barriers to adoption, including the absence of
an IaaS ecosystem and the lack of awareness of available services on the part of
potential buyers.

This report is an attempt to reach out to chief information officers (CIOs) and analyze
their expectations from, and perceptions of, the Indian IaaS market and draw relevant
inferences for the entire IaaS ecosystem. It intends to define areas that will benefit

Contents 1. Executive summary

2. The Indian IaaS market


04

06

2.1 Drivers for cloud IaaS services in the Indian market 06

2.2 Barriers to adoption in the Indian market 07

2.2 Familiarity with cloud-computing concepts 08

2.3 Perception of cloud computing 09

2.4 Timeframe for adoption 10

3. Perceived benefits of implementing cloud IaaS services 11

3.1 Perceived operational and business benefits 11

3.2 Moving to an OPEX model 13

Appendix A: models of cloud computing 25


Appendix B: the global cloud market 26
Appendix C: IaaS and the enterprise 29
Appendix D: addressing security concerns 32
Appendix E: customizing the cloud 34

2 Cloud adoption in India


most from a conversation between emerging cloud IaaS service providers and interested
enterprises in the Indian market. The primary data for this report was collected through an
Ernst & Young administered survey among leading enterprises and interviews conducted
with IaaS ecosystem players.

I hope the findings of this research provide you with valuable insights and I encourage you
to share with us your comments, questions and suggestions. I look forward to continuing
our discussions on this constantly evolving and exciting space.

Milan Sheth

30 June 2010

4. Perceived challenges to cloud IaaS services adoption 15

4.1 Perceived technical, business and environment challenges 15

5. Expectation from vendors 19

5.1 Preferred pricing models 19

5.2 Preferred channel for cloud services 20

5.3 Enterprise expectation of security and controls framework 20

5.4 Vendor assessment criteria 21

6. Recommendations 22

6.1 Recommendations for service providers 22

6.2 Recommendations for enterprises 23

Appendix F: benefits of implementing cloud IaaS services 38


Appendix G: challenges in shifting to a cloud IaaS model 40
Appendix H: cloud enabling technologies: virtualization 41
Appendix I: About the study 42
Sources: 43

Cloud adoption in India 3


1. Executive summary
Cloud computing IaaS brings utility computing closer to reality. It has the potential to
change the way IT hardware is purchased, designed and used. With its promise of infinite
scalability and a pay-as-you-go pricing model, the primary benefit that cloud IaaS services
extends to the large enterprise is greater business effectiveness at lower IT costs. For the
small and medium business (SMB) segment, cloud IaaS services lower barriers to market
growth by lowering technology costs and upfront investments.

What are the primary drivers of cloud adoption in India likely to be?

On the demand side, improving high-speed connectivity, an emerging SMB segment


investing in IT infrastructure and increasing enterprise data center expenditure are
drivers that are expected to contribute to a growing cloud IaaS market. From the supply
perspective, a maturing traditional IT market and an extremely competitive third-party
data center market are likely to be primary drivers of cloud IaaS services.

Our survey targeted CIOs of enterprises belonging to both the SMB and large enterprises
segments. On the buyer side, despite the low visibility of IaaS vendor services in the
market, most CIOs surveyed are aware of, and have expressed interest in, the concept and
the potential benefits of moving at least part of their applications to servers and storage
on the cloud. The following are among the key findings from the survey:

• Positive perceptions, awareness levels and expected timelines for adoption are
indicative of a market that is ready to experiment with cloud IaaS services.
• Effective communication from service providers at this stage should dispel some of the
concerns that enterprises have around ecosystem maturity.
• The SMB segment is more attuned to the benefits and challenges of the cloud.
Furthermore, the maturity of the ecosystem is less of a deterrent to the SMB segment.
This makes the SMB segment ideal to approach as an initial adopter of cloud IaaS
services.
• Enterprises perceive data security and privacy as the biggest barrier to adoption.
• Third-party data service providers and traditional IT service providers are being viewed
as the primary channels for enterprises to buy cloud services from. Such providers
should play a pivotal role in bringing the ecosystem together.

4 Cloud adoption in India


Both enterprises and service providers are likely to benefit from a consultative approach
and in-depth discussions with cloud IaaS service providers in the following areas:

• The differentiating benefits of cloud IaaS services


• Pricing structures, financial models and return on investment (ROI) that a cloud
adopter can expect from moving to the cloud
• Guidelines and benchmarks to help enterprises select applications that are most
suitable for adopting either the private or the public cloud models
• Addressing security and data privacy issues satisfactorily
• Extending customer support to adopters of the technology

For the purpose of this report, IaaS includes both computing/processing capacity and the
storage capacity available through remote virtual server infrastructure.

The cloud services ecosystem is evolving rapidly. Active participation from both service
providers and enterprises at this juncture will help create a more robust ecosystem and
shorter time to adoption. In this report, we evaluate the opportunities, advantages and
challenges for cloud computing infrastructure as a service adoption in India.

Cloud adoption in India 5


2. The Indian IaaS market
At present, the Indian market does not have a mature ecosystem that supports cloud
IaaS services. As such, the cloud IaaS market in India is yet to take off. A few players from
the service provider segment such as Tata Communications, Wipro and NetMagic have
announced services that are likely to evolve into more stable cloud offerings.
Tata Communications, for example, offers its customers an advanced virtualized
environment with flexible arrangements to enhance capacity. On the consumer side, Airtel
is offering Net PCs, low-cost online computers with processing capability accessible over
the net. Infrastructure providers of the cloud such as VMWare, NetApp and IBM have
crystallized offerings for the private cloud, and have taken proactive steps in educating
the consumer on the benefits of cloud IaaS services. Some of the challenges the market
currently faces include:

• Ecosystem maturity
• Customer awareness of services
• Connectivity

The market is seeing a concerted effort in the related Software as a Service (SaaS) space.
The SaaS market is increasingly gaining acceptance in the SMB segment, indicating a shift
in the thought process of CIOs and IT decision makers. A recent NASSCOM EmergeOut
session, held in August 2009, focused on SaaS and the cloud market. The IaaS market is
also likely to benefit from the increasing maturity of these related markets.

2.1 Drivers for cloud IaaS services in the Indian market

While the market is currently at an embryonic stage, the presence of several positive
drivers lends to the promise of cloud IaaS services evolving into a fast-growth segment.

SMB segment: The size of the Indian SMB market exceeds that of any other country in
the Asia-Pacific region. India is also forecasted to achieve the highest SMB IT expenditure
growth rates, with more than 50% of the expenditure expected to be dedicated to
hardware. Even at its current stage of maturity, cloud IaaS is a viable proposition for most
enterprises in the SMB segment. Cloud IaaS services give SMBs access to technologies
they would otherwise not be able to afford. The low lead time of cloud IaaS to deployment
and scalability also negates technology barriers to growth. For vendors offering IaaS, the
Indian SMB market provides a unique opportunity to enter and grow this segment.

Low profitability of third-party data center service providers: Third-party data centers
currently operate at extremely thin margins. This can be largely attributed to the product
mix, which leans toward basic co-location services rather than value-added, high-margin
services such as managed hosting. Cloud IaaS services offer service providers the
opportunity to leverage their existing IT investments to create a new line of value-added
services with more profitable revenues.

ISP telecom operators: Moreover, in the Indian context, internet service providers
(ISPs) own and operate many of the larger data centers. Telecom ISPs have invested
substantially in bandwidth creation, and currently, the market has excess bandwidth
capacity. Introducing cloud IaaS services to their current portfolio will help ISPs increase
bandwidth usage and increase customers’ switching costs.

6 Cloud adoption in India


Enterprise data center expenditure: With significant power and electricity overheads,
enterprise data centers are a major drain on enterprise IT budgets in India.
NetMagic is the first vendor
Ernst & Young’s survey indicates that more than 80% of the enterprises surveyed are to offer cloud infrastructure
considering initiatives to reduce the overall footprint of their data centers. The average size services in India. As part
of an enterprise data center in the Indian market is in the range of 1,000–1,500 sq. ft. The
cost structure of an average data center is illustrated below. As a result of under-utilization,
of its cloud-computing
the overhead cost of under-utilized infrastructure tends to be a significant cost driver. portfolio, NetMagic offers
Data center cost composition the following services:
• Cloud Serve is targeted at the
SMB segment and provides
Equipment Facility Man
power Bandwidth Power costs Maintenance costs
costs disposable servers that
costs costs costs 38% 21%
12% 10% 7% 12% are configured on demand
depending on business needs.
• C
► loud Net is a service model
Maturing traditional IT market: The growth projection for the domestic IT market is
that provides the customer
between 2008 and 2013 is expected to be 15.8%, as against the average annual growth
with the capability to create
of 25% recorded during between 2003 and 2008 (IDC estimates). With slower growth
and increasing competition in the traditional IT outsourcing services market, vendors are complete IT infrastructure,
seeking new business models to increase their revenue streams. including servers, firewalls,
load balancers and switches.
This service specifically
addresses the opportunities
of hosting portals, disaster
recovery and the testing of
mid-sized internet companies
and traditional enterprises.
• PrivateCloud is a dedicated
hosted cloud infrastructure
service catering to large
individual enterprise
requirements.

2.2 Barriers to adoption in the Indian market

Ecosystem maturity: While the cloud IaaS space has elicited interest from a number of
larger players across both system integrators (SI) and telecom ISP providers, there are
very few ‘true’ cloud offerings at present. This is a major deterrent for a potential cloud
IaaS customer.

Customer awareness: Most potential customers are knowledgeable about IaaS services.
However, they not aware of its overall impact and the return on investment (ROI) that
adopting such technologies can yield. They are also not aware of the specific services that
vendors in this space offer.

Cloud adoption in India 7


Connectivity: Poor connectivity may prove to be a significant barrier to adoption. Low
The main drivers of growth internet and PC penetration (less than1% in urban areas, 31 PCs per 1,000, according
in the Indian cloud market to NASSCOM’s report, Perspective 2020) are discouraging. However, given the recent
are the SMB segment, the regulatory progress in third-generation (3G) and fourth-generation (4G) technologies, the
expansion of private players, government initiatives and the declining cost of PCs, India is
current low profitability of likely to see considerable progress in broadband and internet connectivity over the next
Indian data service providers two to four years.
and the enterprise’s need to
While exact price structures are yet to evolve, vendors are looking to reduce prices by
reduce data center-related at least 20–25%. Existing players can expect to see other international and local players
costs. Ecosystem maturity enter this space. As compared to the global market, India is yet to see the entry of cloud-
and customer awareness related, value-added software solutions related to billing, provisioning and management.
This could be a potential challenge for Indian service providers.
of available services and
connectivity are the current
barriers to cloud adoption. Familiarity with cloud-computing concepts
“Which of the following concepts of cloud computing are you highly familiar with?”

PaaS 41%

SaaS 67%

IaaS 81%

PaaS SaaS IaaS


Key:
PaaS: Platform as a Service
SaaS: Software as a Service
IaaS: Infrastructure as a Service

Source: EY survey — Cloud adoption in India, 2010

Gauging from the awareness indicated by 81% of the survey respondents, IaaS awareness
is certainly not expected to hinder cloud IaaS service adoption. A related question on
areas of adoption indicates that people are equally open to adopting cloud in storage and
processing capability.

Further, the survey indicates that awareness levels on SaaS are currently lower than that
of IaaS. The SaaS market in India has only just begun to enter a phase of realization. SaaS
vendors are pushing aggressively in the market for the adoption of their services. As this
market grows, a beneficial spillover effect on the IaaS market can be expected.

8 Cloud adoption in India


2.3 Perception of cloud computing

The positive perception of IaaS indicates a significant mainstream market that vendors
can target. Of the total respondents surveyed, 68% have a positive mindset toward cloud
computing, with 24% regarding it as a driver of the next wave of IT innovation and 44%
believing that it will mature in a few years.

Around 20% of the respondents were not aware of cloud-computing services in great
detail. This section represents a sizeable percentage that is likely to benefit from customer
outreach programs, industry events and demonstrations educating them about the
concepts as well as the benefits of cloud computing. A minority of 12% believes that cloud
IaaS services will not suit their business needs.

“Which of the following appropriately describes your view on ‘cloud computing


Infrastructure as a Service’?”

20%

44%

24%

12%

Cloud computing is an evolving concept and will mature in some years

Cloud computing offerings will not suit my business

Cloud computing will drive the next wave of IT innovation

Not aware of these services in great detail

Source: EY survey — Cloud adoption in India, 2010

Cloud adoption in India 9


2.4 Timeframe for adoption
High awareness levels and
the positive perception of “When do you plan to adopt ‘Cloud Computing - Infrastructure as a Service’?”
cloud indicate a market that
will see robust growth rates
once the service is available 12% 8%

and once enterprises begin 20%


adopting the technology. 16%

44%

0-1 year 1-2 year 2-3 year 3-5 year 5+ year

Source: EY survey — Cloud adoption in India, 2010

The survey response indicates that more than 70% of the respondents are looking
to adopt the technology in the next three years. The implied pattern of adoption is
also indicative of an innovation diffusion curve, with a significant mainstream market
developing in the next three to five years.

Innovation diffusion curve: IaaS, Indian market

Early majority

Early Late majority


adopters
Innovators Laggards

8%
20% 12%
44% 16%

Mainstream market

Source: EY survey — Cloud adoption in India, 2010

10 Cloud adoption in India


3. Perceived benefits of implementing
cloud IaaS services
The potential benefits of a well-designed and well-executed cloud-computing
infrastructure services strategy can be significant. The relative importance of each benefit
varies considerably with the size of the enterprise. Key benefits include lower costs, an
on-demand self-service model, low entry barriers and the elasticity and scalability of
resources. This section summarizes the benefits as perceived by potential adopters of the
cloud IaaS services in the Indian market.

3.1 Perceived operational and business benefits

We asked respondents to grade a list of operational and business benefits on a four-point


scale of extremely significant to not significant.
Operational benefits

42%
Scalibility 38%
14%
4%

42%
High uptime 33%
21%
4%

38%
Reduced risk of 42%
technology obsolence 17%
4%
29%
Improved hardware 27%
utilization 25%
17%

29%
Improved datacenter 21%
efficiency 33%
17%

25%
Faster deployment 21%
50%
4%
Extremely significant Fairly significant Significant Not a driver

Source: EY survey — Cloud adoption in India, 2010

Cloud adoption in India 11


Perception of operational benefits — SMB and large enterprises
90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
Scalability High uptime Reduced risk Improved data center Faster speed
of technology hardware efficiency of deployment
obsolence utilization

SMB Large enterprsies

Source: EY survey — Cloud adoption in India, 2010

Business benefits

29%
Ability to focus on 38%
core activities 29%
4%

29%
Usage-based 33%
payment 29%
8%

25%
42%
No capital investment
25%
8%

13%
42%
Intangible benefits
33%
13%

8%
33%
Ability to innovate
42%
17%

Extremely significant Fairly significant Significant Not a driver

Source: EY survey — Cloud adoption in India, 2010

12 Cloud adoption in India


Perception of extremely significant business benefits — SMB and large enterprises
50%

40%

30%

20%

10%

0%
Ability to focus Usage based No capital Intangible Ability to
on core activities payments investment benefits innovate

SMB segment Large enterprises

Source: EY survey — Cloud adoption in India, 2010

There is a distinct difference in the perceived benefits of cloud by the SMB and enterprise
segments. The SMB segment considers cloud IaaS services for “true” cloud benefits, while
the large enterprise perceives benefits on the operational side that are generally derived
from an outsourcing model.

• The SMB segment has cited high uptime as the top operational benefit, while large
enterprises regard lower risk of technology obsolescence as the most important
operational benefit.
• The SMB segment regards usage-based payments and low capital investments as
extremely significant business benefits, while the large enterprise perceives the ability
to focus on core activities as the top business benefit.

Cost does not seem to be a factor in driving the decision to adopt cloud IaaS services.
Surprisingly, both the SMB and large enterprise segments have given lower priority to
other typical cloud benefits such as the ability to innovate and faster deployment. This
may be indicative of an awareness gap of the differentiated benefits that cloud IaaS
services are capable of delivering.

3.2 Moving to an OPEX model

At 58%, the majority of the respondents favor a model that facilitates the shift of
expenditures from a capex to an OPEX model.

• Of the total respondents surveyed, 38% are neutral to the shift.


• Only 4% of the respondents do not see any benefit in the shift.

Cloud adoption in India 13


The SMB segment appears “How do you view a shift to an OPEX model?”
to be more attuned to
the total impact of 4%
differentiated benefits that
can be derived from IaaS.
The gap in understanding
of the large enterprise 38%

indicates an area to be
58%
addressed during the initial
contact with a potential
buyer of this segment.

Good: Helps IT be more adaptable to business needs in a cost effective way


Neutral
Not good: Not convinced that I can make the shift in a way that stays beneficial to me

Source: EY survey — Cloud adoption in India, 2010

14 Cloud adoption in India


4. Perceived challenges to cloud IaaS
services adoption
Implementing cloud computing will not be without challenges. Ernst & Young’s market
survey indicates that an overwhelming 72% of the respondents cite potential data privacy
and security issues as extremely significant concerns. The other area of concern is around
vendor maturity and the capability to provide cloud services. Among the challenges
generally associated with a shift to cloud IaaS services are:

• Data security and privacy


• Legal and regulatory compliance
• Control and responsiveness
• Lack of benchmarking or leading practice experience
• Ambiguity over how best to quantify, track and communicate the benefits of
cloud computing
• Threat of potential over reliance on a single-source IT provider
• Lack of interoperability
• Resistance from datacenter IT personnel

The following section summarizes some of the key challenges the Indian market perceives.

4.1 Perceived technical, business and environment challenges

We requested our respondents to grade a list of technical, business and environmental


challenges on a four-point scale of extremely significant to not significant.

Perceived technical challenges

71%
Data privacy and 17%
13%
security

50%
Latency 29%
17%
4%

46%
Resource uptime 29%
25%

8%
Unsure of impact on 54%
current IT 29%
8%

Extremely significant Fairly significant Significant Not a driver

Source: EY survey — Cloud adoption in India, 2010

Cloud adoption in India 15


Perception of technical challenges — SMB and large enterprises

100%

80%

60%

40%

20%

0%
Data security Latency Resource Unsure of impact
% uptime on current
IT architecture

SMB Large enterprises

Source: EY survey — Cloud adoption in India, 2010

Data security and privacy is a major concern for enterprises considering implementing
cloud IaaS services. Cloud IaaS is a distributed computing model with inherent ambiguity
around where the data resides. This distributed model leads to a perception of higher risk
and security challenges. A cloud service provider can mitigate these risks by establishing
an effective security and controls framework (appendix D) in the following areas:

• Identity and risk management


• Compliance and audit
• Application level security
• Data backup and recovery
• Legal
Perceived business challenges

50%
Vendor lock-in concerns 33%
(inability to switch vendors easily or 13%
bring operations back-in) 4%

29%
Not sure about the ROI to be 29%
expected if I invested in 29%
cloud computing 13%

21%
25%
Internal resistance
25%
to process change 29%

8%
Loss of control over 33%
17%
IT operations 38%

Extremely significant Fairly significant Significant Not a driver

Source: EY survey — Cloud adoption in India, 2010

16 Cloud adoption in India


Perception of business challenges — SMB and large enterprises
90%
80%

70%
60%
50%

40%
30%
20%

10%
0%
Vendor lock-in Not sure of ROI Internal resistance Loss of control

SMB Large enterprise

Source: EY survey — Cloud adoption in India, 2010

Vendor lock-in is perceived as a significant challenge to the adoption of cloud computing.


Vendors can currently mitigate this concern by making their services more transparent
so that customers can understand how their resources are being managed. In the long
term, as the ecosystem matures and the industry adopts open standards to facilitate
interoperability, this concern will likely be mitigated. Efforts need to be made to develop
forums such as the Open Cloud Alliance to enable the development of more transparent
and interoperable solutions.

Enterprises are also unsure of the cost savings that cloud computing can help them
achieve. Vendors need to develop comprehensive financial models detailing the
comparison of in-house infrastructure with cloud IaaS to help firms estimate the ROI.
Usage-based pricing models with monthly or hourly billings can be used to compare costs
with the current datacenter costs and estimate the ROI.

Perceived environment challenges

46%
Lack of mature service providers 38%
17%

25%
No vendors available with 54%
a consolidated value proposition 21%

Lack of guidance, leading 25%


46%
practice or experience of other
17%
companies to draw from 13%

21%
Lack of ecosystem that supports 38%
adoption of the service 42%

Extremely significant Fairly significant Significant Not a driver

Source: EY survey — Cloud adoption in India, 2010

Cloud adoption in India 17


The shortage of mature service providers is the single overwhelming environment-related
The most significant challenge that enterprises perceive. Vendors need to develop go-to-market strategies to
challenges enterprises develop customer relationships and retention strategies. Collaboration among all channel
perceive in adopting cloud partners is required to build a compelling case and visibility for cloud IaaS services.
Vendors need to create effective strategies on the value proposition and features (“what
IaaS services include to sell”) for different market segments (“whom to sell”) and a definitive sales and channel
data privacy and security, partner strategy (“how to sell”).
vendor lock-in concerns
Cloud service providers should invest in developing cloud labs that enable customers to
and ecosystem maturity.
use cloud IaaS services on an experimental basis. This is also expected to assist customers
Significantly, the SMB in assessing challenges that could arise from integrating enterprise data centers with
segment does not rate infrastructure on the cloud. Cloud-computing adoption case studies of customers
worldwide should be made available to enterprises to help them clearly understand
ecosystem maturity as a
the areas where cloud IaaS services benefits can be leveraged. Interestingly, the SMB
major challenge.
Perception of environment challenges — SMB and large enterprises
60%

50%

40%

30%

20%

10%

0%
Lack of mature No vendors Lack of Lack of
service providers available guidance ecosystem support

SMB Large enterprise

Source: EY survey — Cloud adoption in India, 2010

segment does not perceive environmental challenges to be as critical a barrier to adoption


as compared to the large enterprises. The lack of mature service providers, guidance or
ecosystem support are rated as less significant concerns by SMBs. Vendors should target
the SMB segment as potential early adopters of cloud computing.

18 Cloud adoption in India


5. Expectation from vendors
This section summarizes the survey’s key findings regarding the enterprise expectation of
vendors. It covers areas unique to the cloud IaaS services environment such as the pricing
model, service channels, acceptable security and controls framework and key vendor
assessment criteria.

5.1 Preferred pricing models


Preferred pricing models

8%

13% 29%

25%

25%

Annual contract based on monthly capped resource requirements with overage charges
Month to month minimum commitment on resource usage with overage
Month to month resource usage based charges without any contract
Monthly/Annual charges per user
Others

Source: EY survey — Cloud adoption in India, 2010

The essence of the cloud IaaS model is a pay-as-you-go financial model. The high percentage
of respondents indicating their preference for annual contract-based pricing indicates lack
of clarity on the cloud’s financial model. Further analysis indicates that the majority of the
respondents opting for an annual contract-based model are the large enterprises, while the
majority of the SMB segment prefers the resource-based usage model.

At this stage, a single pricing model is unlikely to satisfy all potential customers in the
market. Vendors need to have pricing structures that are easily understood, transparent
and offer substantial benefits in terms of cost savings. Options for alternative pricing
models can be as follows:

• A true pay-as-you-use model based on the use of resources such as per hour usage or
CPU cycles consumed will be attractive to the SMB segment.
• More flexible models integrating the features of usage- and contract-based pricing can be
developed, where server instances can be charged on a daily or monthly basis instead of hourly.
• Reserved instances with discounts on hourly rates can be more cost-effective for larger
enterprises with visibility on demand. Reserved instances are likely to help large enterprises
better estimate and plan their cloud IaaS needs.

Cloud adoption in India 19


5.2 Preferred channels for cloud services

46% 46%

8%

Data center service providers


hardware and software vendor
IT service providers/system integrators

Source: EY survey — Cloud adoption in India, 2010

The stated preference of enterprises to buy cloud IaaS services from IT service providers
or data center service providers could mean that the cloud computing idea becomes
central to these service providers’ portfolios. Equipment vendors should recognize and
respond to this possibility.

For data center providers, cloud IaaS services may prove to be a more profitable source
of revenue as compared to their existing service/product mix. IT service providers looking
to leverage the cloud IaaS opportunity should form alliances with third-party data center
service providers or invest in building their own infrastructure.

Data center service providers and IT system integrators also need to play a pivotal role in
bringing the ecosystem together to demonstrate commitment to security, service-level
agreement (SLA) adherence and complete support at every layer of the cloud
service model.

5.3 Enterprise expectations on security and control framework


100%
88%
83%
75%
71%
63%

33%
29%
25%
13% 13%
4% 4%

Disaster Business Identity Data Security Third-party


recovery continuity access encryption certifications audit
planning management

Need to have Nice to have Not needed

Source: EY survey — Cloud adoption in India, 2010

20 Cloud adoption in India


As indicated in the challenges section, data security and privacy constitute the primary
challenge of the cloud IaaS model. Consequently, the majority of the respondents have
identified that the service provider should address the following areas.

• Disaster recovery
• Business continuity planning
• Identity access management
• Data encryption
• Security certification
• Third-party audits

5.4 Vendor assessment criteria


Vendor evaluation factors

88%
Data security and privacy 4%
8%

75%
SLA compliance 21%
4%

58%
Cost competitiveness 29%
13%

58%
Portability and interoperability 25%
13%
4%
Vendor support network 46%
42%
13%

42%
Pricing models 46%
13%

38%
Past track record 38%
21%
4%

Extremely significant Fairly significant Significant Not a driver

Source: EY survey — Cloud adoption in India, 2010

Data security and privacy again shines through as the top differentiating factor for the
enterprise. Providers should refer to Appendix D for an initial guidance on security areas
to be considered for cloud adoption.

While vendor lock-in and lack of guidance are perceived to be challenges to cloud-
computing adoption, interoperability and vendor support network are not rated very high
on the criteria list of vendor assessment. This indicates that both these factors can be
expected to be barriers to adoption and associated with the environment rather than as
differentiating factors between vendors. With cloud IaaS services being a new business
and operational model, a high degree of customer interaction during the sales cycle and a
strong support framework will assist customers in adopting the technology seamlessly.

Cloud adoption in India 21


6. Recommendations
As the market evolves, economies of scale provided by third-party organizations through
cloud computing IaaS can create a viable environment for enterprises to reduce costs and
better align limited IT resources with key business goals and initiatives. In a market that is
ready to experiment with cloud IaaS services, providers need to begin crystallizing their
cloud offerings, while cloud adopters should begin to engage with providers to include
cloud IaaS services in their overall IT strategy.

6.1 Recommendations for service providers

1. Develop a cloud IaaS strategy: The market is ready to experiment with cloud IaaS.
Cloud providers should incorporate a cloud IaaS strategy in their overall portfolio and
initiate communication with potential buyers on the drivers and total value proposition
of cloud IaaS services to enterprises. Storage as a Service can serve as an initial service
offering, since it is an easier area for enterprises to experiment and integrate with. There
is an expressed need-awareness gap on the storage offering in the market, with 55%
indicating their readiness to adopt the technology and only 33% indicating awareness of
the service.

2. Reach out to the SMB segment: Providers should target the SMB segment for initial
adoption. The SMB segment is more attuned to cloud benefits and challenges, thus
making the SMB segment the ideal early adopter of the technology.

3. Develop go-to-market strategy focusing on future roadmap for cloud IaaS: Providers’
go-to-market strategies need to be aggressive in communicating the cloud IaaS services
currently on offer as well as the future roadmap of these services.

4. Set up test labs: To allay apprehensions surrounding the actual applicability of cloud
IaaS services, vendors should set up test areas, which customers can access on an
experimental basis. This will allow enterprises to experience the technology before full-
scale adoption.

5. Communicate with buyers on the perception of cloud benefits and challenges: The
perception of these benefits and challenges need to be factored into communication
strategies, service offerings and SLA structures.

6. Develop pricing models and ROI expectations: Enterprises are expected to benefit
from detailed financial models benchmarking in-house data center costs with the
investment and running costs associated with the cloud IaaS model, using different pricing
models to help estimate the ROI.

22 Cloud adoption in India


7. Establish collaborative engagements with the enterprise: The cloud IaaS space is
evolving. As such, it is necessary for vendors to take a collaborative approach to engaging
with enterprises. Providers should focus on the following areas:

• Differentiating the benefits of cloud IaaS services


• Discussions with potential buyers on the pricing structure, financial model and ROI that
a cloud adopter can expect from moving to the cloud
• Guidelines and benchmarks to help enterprises select applications that are most
suitable for adoption in either the private or the public cloud model profitably
• Security-related aspects

8. Building the ecosystem: Data center service providers and IT system integrators
should also play a pivotal role in bringing the ecosystem together and demonstrating the
commitment to security, SLA adherence and complete support at every layer of the cloud
service model.

9. Building competitive advantage: Some of the ways in which cloud service providers
can build their competitive advantage in this space include:

• Providing consulting and integration support to customers


• Providing excellent customer support options
• Building the SLA framework in collaboration with the enterprise
• Security and data privacy concerns should be met as a primary hygiene check

10. Addressing security concerns: Cloud computing IaaS services constitute a distributed
computing model with inherent difficulties in locating where the data is stored. This leads
to a unique set of security challenges and concerns.

6.2 Recommendations for enterprises

Enterprise IT decision makers need to continue monitoring the market in the short
term for provider strategies around cloud IaaS services. Enterprises at the forefront of
technology adoption should start interacting with service providers to understand current
offerings. Although the ecosystem does not appear to be mature enough to extend
support to a complete cloud IaaS services portfolio, the economic crisis could well serve
as an impetus to both providers and enterprises to opt for the cloud. With providers
beginning to invest in infrastructure, the economics and feasibility of cloud services are
likely to evolve rapidly.

Cloud adoption in India 23


Companies considering cloud computing need to consider the broad range of business
Cloud IaaS service providers factors and effects that may arise from such an initiative. Among the cloud computing-
should look at building related areas companies should consider are:
out a complete cloud • Privacy
IaaS service portfolio and • Enterprise architecture
begin communicating with • Information security
potential buyers. Enterprise • Application controls and security
IT decision makers should • IT effectiveness/transformation
continue to monitor the
The following questions are critical for business leaders to consider when planning a
market in the short term transition to cloud computing:
for provider strategies
• How can my data center be better equipped to function with part of its infrastructure
around cloud IaaS services on the cloud?
and actively participate in • What specific areas are most appropriate for cloud computing?
creating a robust ecosystem. • What services are third-party vendors providing?
• What are the most significant data privacy and security issues that we will likely face?
• What are the cloud provider’s key risks and performance indicators, and how will this
impact be monitored and measured from an enterprise perspective?
• How can I deploy IaaS in a way that makes it relatively easy to switch providers, if
needed?
• What are we trying to achieve through cloud computing? What ROI can we expect?
• What technology needs will be required with cloud computing?
• How do I assess the actual infrastructure that will be needed to support my
applications? How do I benchmark application performance in the provider
environment?
• How does resource pooling and allocation occur within the cloud providers’
infrastructure setup?
• Based on the approach, application performance and expected usage patterns, what is
the best pricing strategy?
• How can existing resources, both machines and people, be reallocated for maximum
impact?
• What are the broader cultural and operational implications of this approach?

24 Cloud adoption in India


Appendix A: models of There are three main cloud
service models: SaaS, PaaS
cloud computing and IaaS. IaaS provides the
capability to execute rent
There are three typical models through which cloud-computing services are offered: processing and storage
• Software as a Service (SaaS): Software is offered as an on-demand service, thereby over the internet. It is, in
reducing the need for the customer to install, upgrade and maintain applications.
Salesforce.com is one of the first enterprise applications to be offered as SaaS.
many senses, the most
• Platform as a Service (PaaS): The development environment is provided as a
commoditized version of
service that encapsulates a layer of software integrating the operating system (OS), cloud services.
middleware and application software. Customers develop applications with the help of
vendor-provided application programming interfaces (APIs) on platforms enabled with
automated management and scalability. Commercial examples of PaaS include Google
Apps Engine and Microsoft Windows Azure.
• Infrastructure as a Service (IaaS): Processing, storage and bandwidth are offered
on demand with metered billing. A consumer can store data and run an OS, software
applications and web or database servers on the rented hardware. Some major
commercial examples of IaaS include Amazon, Rackspace and Savvis.

CRM ERP Email

Enterprise web applications

Database Messaging Queuing

API and middleware

Available as a metered, scalable


and ubiquitous service
Monitoring Provisioning Scheduling
Bandwidth
Infrastructure as a Service

Web management console Storage


Software as a Service
Platform as a Service

vStorage vServer vNetwork Compute

Virtualization
Principal characteristics

Abstraction of infrastructure
Storage Server Network
Pooled resources
Hardware Services oriented architecture

Scalable
Power HVAC Land
Utility based model of consumption

Facilities

Cloud adoption in India 25


Appendix B: the global cloud market
The cloud market is constantly evolving as larger scale adoption creates viable
commercial opportunities in this space. The IDC forecasts that by 2013, cloud will
form 10% of total IT expenditure across the five major IT product segments (business
applications, infrastructure software, application development and deployment software,
servers and storage).

Worldwide IT cloud services spending: 2008–2013*


2008 2013 CAGR
All IT spending** (USD billion) 383 460 2.7%
Cloud spending 16 44 22.5%
IaaS spending (% of cloud spending) 14% 29%
Total IaaS spending (USD billion) 2.24 12.8 41%

* Source: IDC 2009


**Business application, application development/deployment, system infrastructure software, storage and server

Cloud computing and IaaS growth


50
44.2
45

40
35.2
35

28
30
USD billion

25 22.3

20 17.8
16.2

15 12.8
9.4
10 6.9
5.1
3.7
5 2.2

0
2008 2009 2010 2011 2012 2013
Year

IaaS Cloud spending

While the market share of cloud services is forecasted to be around 10%, its growth
trajectory, at a CAGR of 22.5 %, is four times the growth of traditional IT. IaaS accounted
for 14% of the total cloud market in 2008 and is expected to grow to account for
approximately 29% of the overall cloud market in 2013. This is expected to position the
IaaS market at USD12.8 billion in 2013.

26 Cloud adoption in India


Drivers of cloud IaaS services in the global market

Among the major factors contributing to the growth of the IaaS market is a maturing
ecosystem. Amazon.com was one of the first to offer cloud IaaS services on a commercial
scale, and has successfully established market dominance in this space. Amazon currently
has more than 440,000 developers registered with Amazon EC2 and storage services.
IBM is also betting heavily on becoming one of the few true utility providers of technology.
The company has strategically located IBM cloud labs in both major and emerging
markets. IBM is now looking to leverage these cloud labs to address the specific needs of
customers experimenting with transitioning IT requirements to the cloud model.

Cloud computing timeline

1999 2002 2006 2008 2009

Google Verizon CAAS,


Verizon CAAS, AppEngine,
Salesforce.com Amazon Web Amazon EC2
Amazon EC2 IBM Blue Cloud,
(SaaS) Services (AWS) load balancing,
load balancing, Savvis Cloud monitoring
monitoring Hosting

Within a short span of time, other top players such as Google and Microsoft started
offering cloud products. A number of niche players are also challenging Amazon’s market-
leading position, including service providers such as Savvis, Verizon, Box.net, GoGrid and
Terramark. Support and commitment from large players have also led to a concerted
effort to educate customers through conferences, seminars and publicity. Industry
forums such as the Open Cloud Alliance are focusing on resolving some of the barriers to
cloud adoption, including inter-operability and security. An extremely robust developer
community that has taken to developing and deploying applications on the cloud has also
helped popularize cloud IaaS services.

Cloud adoption in India 27


The cloud ecosystem

Infrastructure services Management


Storage Compute Services management Cloud management
• Amazon S3 • Amazon EC2 • RightScale • 3Terra Applogic
• Amazon SirnpleDB • GoGrid • Cohesive FT • VMWware Ops
• Microsoft SSDS • Joyent Accelerators • Kaavo • Cohesive FT
• Nirvanix • Flexiscale • Scatr • Open QRM
• Rackspace Mosso Cloud FS • Terramark • CloudStatus • Enomalism
• CTERA • Flexiscale • Cloud Foundry • Eucalyptus
• Appnexus • Open QRM
• Elastra • Appistry
• Savvis
• Rackspace
Infrastructure providers
Servers Storage Network Billing
• IBM • EMC • Juniper • Aria Systems
• HP • NetApp • Cisco • eVapt
• Dell • 3Par • Akamai • OpSource

Operating Systems Virtualization Identity Industry Bodies


• Microsoft Azure • VMWare • Ping Identity • Open Cloud Alliance
• Google Chrome • Citrix Zen • Open ID • Open Cloud Manifesto
• Linux • Microsoft Hyper V • Syrnplified
Rising computing demand in the BRIC countries has also opened up new cloud markets.
IaaS has steadily gained The overriding business need in these countries is for inexpensive and effective solutions.
ground in the past few Using cloud computing’s usage-based pricing models, traditional IT vendors can now
leverage cloud to boost growth in these price-sensitive markets. Cloud computing can help
years. Support and vendors shift focus from high-end, large-enterprise buyers of IT resources to the SMBs
commitment from a number that constitute the major industry segment in developing countries.
of large players in the
market and well-publicized Case study: Vendor solutions
implementation of the
Source: Amazon Web Services (AWS) website
cloud have contributed
to its success. Amazon: The Amazon AWS cloud-computing platform can host business applications
on the cloud with resizable compute capacity. The Amazon Elastic compute is a web
service that provides a virtual development platform. AWS has recently introduced
a limited beta version of its Virtual Private Cloud (VPC). The VPC is intended to be a
hybrid solution, extending to enterprises the capability to connect their existing IT
infrastructure to an isolated set of resources at the AWS data center through a virtual
private network connection.

Instances are charged on hourly usage basis, with charges increasing in tandem with
compute capacity. There is also a provision to reserve the instance by making a low
one-time payment with a significant discount for its hourly usage rate. Limited inbuilt
memory for a server instance is free. More volume of data can be stored in Amazon
Storage Services (S3), where it is billed at storage rates. Data transfer is billed based on
data transferred in and out of Amazon EC2. Elastic IP and elastic load balancing are also
charged separately.

28 Cloud adoption in India


Appendix C: IaaS and the enterprise
IaaS is an operational model in which physical IT resources are delivered as abstracted IT
services, both on demand and at scale. IaaS mainly refers to processing and storage capacity
available from anywhere, through any connected device. Infrastructure resides in massively
scalable provider data centers, where processing capacity and storage can be dynamically
provisioned and shared to achieve significant economies of scale. The end user accesses the
infrastructure over the internet through a user-centric interface that makes the cloud IaaS
transparent.

On the buyer side, adding cloud IaaS leads to reduced capital spending on hardware and a
progressive shift from a capital to an operational model of IT expenditure. The degree to which
an enterprise implements cloud IaaS services can be directly related to the company’s growth
stage. A start-up company is more likely to use cloud infrastructure for most of its IT needs, as
this is expected to drastically reduce entry barriers. Larger enterprises are likely to use public
clouds to meet stretch capacity needs, while continuing to use private clouds and existing
enterprise data centers for heavier applications that require more uniform resource usage.
Integrating in house data centers with cloud infrastructure

Enterprise cloud user

Access through the internet


High demand
variability,
non core
applications

Low demand Scaling & User Billing


Monitoring
provisioning interface
variability,
core applications Provisioning and management

Virtualized Virtualized Virtualized


server storage network
Virtualization

Servers Storage Networks Security

Physical infrastructure
Enterprise data center
Cloud provider

• Better utilization, lower costs


• Scalability on demand

Storage as a service: The provider rents out storage hardware on a cost-per-gigabyte-data-


stored model. Storage as a Service provides a cost-effective method with which to meet the
enterprise’s data-storage needs. Cloud storage offers an alternative solution for particular
kinds of unstructured file data, which require batch processing and have low security
requirements or large datasets such as rich media files, image files and records, streaming
media and secondary/tertiary web accessible storage for data.

Cloud adoption in India 29


Backup and archival are among the traditional uses of cloud storage. However, as it
evolves, cloud storage is expected to also power the development of a new breed of
applications that leverages service-oriented architecture (SOA), web services, APIs and
their advanced services.

An example of such an application is a content delivery network (CDN), which is ideal


for cloud hosting and the distribution of popular files accessed frequently. Regular
cloud storage networks to access such files are not optimal, as they support lower data
transfer speed. CDN is a viable alternative for hosting frequently accessed website
components and distributing downloadable software and its updates, media audio and
video files. Integration with cloud storage is provided through APIs, which support multiple
programming languages.

Computing as a Service (CaaS) provides the capability to spin up virtual machines


and load them with pre-configured or customized images of OS, web and database
servers, thus creating a complete virtual environment for application development and
deployment. Processing capability is provided as server instances configured with OS and
software images acting as units of deployment. The virtualized server instance may be of
varying sizes, with different memory, instance storage and virtual core configurations.

CaaS is conducive to a variety of processing needs, and has so far been used primarily for
the following:

• Building a virtual test and development environment on the cloud, replicating


production environments
• Applications with unpredictable capacity requirements such as those directed toward
marketing campaigns
• Data mining applications needing high-powered processing over unstructured data
• Bandwidth that is used to access cloud IaaS services is billed for bandwidth usage on a
per-GB-data inbound and outbound transfer.

Case study: Customer adoption of IaaS

• July Systems: July Systems is a leading mobile media company offering feature-rich
mobile solutions for live events, updates and advertising on its Mi™ Channel. July
Systems Live Center on Mi™ faces extremely dynamic requirements due to support
extended for multiple devices, dynamic content and the personalization of delivered
content. The platform also faces steep hikes during sports events and live news.
July Systems uses Amazon’s cloud computing services to cost-effectively scale its
business.
• British Telecom: British Telecom uses AppLogic to deliver market-leading, on-demand
telecom services using only a web browser and basic IT skills. 3Tera offers AppLogic
utility computing services through a grid platform that converts commodity servers
into scalable grids, on which users can visually operate, deploy and scale transactional
web applications without any code modifications.
• Eli Lilly: To invent a breakthrough drug, Eli Lilly needed 25 servers to crunch large
volumes of data. Rather than taking months to become functional, Eli Lilly took
the alternate cloud route. Eli Lilly created an account on AWS and had 25 servers
operating almost instantaneously. Consequently, transactions were completed within
a day at a total cost of USD89.

30 Cloud adoption in India


A key aspect of the overall IaaS experience to the end user is the provisioning and
management layer that abstracts the hardware. Some of the key functionalities delivered
Storage as a Service has
to the user through this layer include: been primarily implemented
• Billing to meet storage needs
• End-user provisioning and scale up capability arising from unstructured
• End-user monitoring and management data and backup needs and
• User access and user management interface to support CDNs.
• Wrapper interfaces such as software backup solutions CaaS has been used to
primarily build scale into
existing infrastructure.
number of large players
in the market and well-
publicized implementation of
the cloud have contributed
to its success.

• Animoto: Animoto is a good example of leveraging cloud for instant availability


and virtually limitless scope. Animoto’s Facebook application creates videos for
consumers and applications. The application is complex, with each subsystem
requiring multiple servers. Animoto ramped up from 25,000 to 250,000 users
in three days with the help of AWS, thereby provisioning around 4,000 servers
simultaneously.
• CyberGamer: Online gaming company CyberGamer has tapped the Rackspace
Cloud to support its growing number of subscribers. CyberGamer has increased its
membership from 1,000 users six months after its launch, to 21,000 by the end of
the second year. The requirements of a gaming company are dynamic because of the
uneven traffic flow and higher computing power needed to process queries round
the clock. On implementing virtualization, CyberGamer found that during peak times,
it would still hit a threshold that prevented new members from viewing the website
content. Subsequently, the company transferred its IT resources to the Rackspace
cloud with virtually no downtime and, as a result, experienced a 137% increase in
traffic within the first month. This was indicative of the amount of traffic the company
was losing previously on account of overloading.

Cloud adoption in India 31


Appendix D: addressing
security concerns
Cloud computing IaaS is a distributed computing model with inherent difficulties in
locating where the data is stored. This leads to a unique set of security challenges and
concerns. Data security and privacy is also rated as the top concern of enterprises moving
to cloud technology. Listed below are some of these associated concerns as well as
suggested guidelines to resolve the concerns:

Security and data privacy guidance principles


Issue Suggested guidance
Identity and access management
Identity and access management are very important for the • Providers’ authentication systems should either meet or exceed
strategic use of dynamic cloud computing resources. enterprise standards.
• Enterprises should be encouraged to adopt single-sign on for
applications to simplify identity and access management.
• When resources move to cloud, authorization should be
provided at business-line levels, with policies regulating the
provision and release of resources.
• Encryption and key management policies should be
implemented for secure access.
Compliance and audit
Data location abstraction and multiple copies of data can prove • Metrics for formalizing the audit should be developed.
troublesome with respect to compliance. It may be difficult to • Due diligence of the suitability of existing audit standards to the
audit the data in the cloud, because isolating the scope in a cloud cloud environment should be conducted.
environment is challenging. • Cloud providers should try to acquire certifications such as
SAS70.
• SLA and security-level objectives should be redefined to include
data audit.
Application-level security
Porting an application on the cloud has implications such as • Vendors should provide the enterprise with capabilities to
what the security levels are and who controls them. The vendor create customized virtual machine images.
providing virtual machine images needs security levels similar to • I► nter-application communication security should be ensured in
those of in-house applications. a distributed cloud environment.
• Additional security and masking sensitive enterprise
information are needed.
• Application security must be represented as a clearly
articulated set of actions and guarantees within the SLA.
• The growth of cloud computing is expected to increase the type
and occurrence of incidents, such as malware infection, data
breach, Man-In-The-Middle discovery, session hijacking and
user impersonation. Application-level firewalls and vulnerability
detection need to be put in place.

32 Cloud adoption in India


Issue Suggested guidance
Data backup and disaster recovery
Data backup and disaster recovery are among the most desired • Vendors need to ensure the redundancy and backup of all
security and control framework controls. hosted data through replication and storage across multiple
zones.
• Business continuity plan with round-the-clock failover
protection are required.
• The SLA should include terms on data backup and disaster
recovery.
Legal
• Some of the legal risks are similar to those faced in any • Enterprise and vendors need to perform due diligence and
outsourcing industry, with the enterprise being held evaluate their own practices, needs and restrictions to identify
responsible for any acts of its subcontractors. the legal barriers and compliance requirements associated with
• Some customer contracts prohibit trans-border data flow. a proposed cloud-computing transaction.
• The adoption of industry standards for security and • Cloud vendors need to collaborate with the enterprise to define
regulations are mandatory for some types of data. the key components of the contractual arrangement.
• Enterprises may need to know the physical location of their • The vendor needs to provide business continuity and disaster
data, which can be dynamic and prone to change. recovery to prevent outages.
• Data residing in the cloud may not be easily accessible for • The contract should be periodically monitored and reviewed.
electronic discovery in case of litigation. In case of any change in the vendor’s business model or the
compliance laws, the contract should be updated accordingly.
• The legal implications of whether the third-party vendor or the
enterprise is held responsible in case of a data breach should be
examined.
• The ownership and control of the data in the cloud should be
given to the enterprise so that it controls the confidentiality,
security or privacy of its databases, or if it wishes to control the
entity that has access to its data.

Cloud adoption in India 33


Appendix E: customizing the cloud
Like all good things, cloud IaaS services, too, come in many varieties. The nature of the
application and the level of control required determine the most suitable deployment and
connectivity model. Cloud services can be customized to include the following parameters:

• Level of investment the enterprise is willing to make for the transition


• Core vs. non-core applications
• Expected SLAs and vendor commitment to application uptime
• Security
• Data privacy
• Degree of control the enterprise wants over its infrastructure

Differences in cloud models arise from the deployment method and the way in which a
customer chooses to access cloud IaaS services.

Deployment models

Cloud services are primarily deployed and managed in three modes: public, private and
hybrid. The deployment models differ on two important factors:

• Service access
• Service control/ownership

Cloud-deployment models

Managed hosting
Third party
shared Hybrid

Third party Public clouds


Offsite

managed
dedicated
Deployment

Managed by
organization

Third party Traditional Private clouds


On site

internal IT setup
IT team

Capital intensive Mixed Operational


and fixed expenditure
and varibale
Financial model

34 Cloud adoption in India


Public clouds: Third-party service providers offer public clouds. They are usually multi-
tenant (shared) operating environments with all the benefits of elasticity, but the third-
party vendor controls the management of the resource and security.

Private clouds: An organization or its designated service provider supplies private cloud
services with dedicated firewalls and operating environments. The organization controls
the management and security of the cloud IaaS.

The challenges to private cloud adoption are primarily around high initial capital
investments and less scalability due to the limited availability of resources as compared to
a public cloud.

Hybrid clouds: Hybrid clouds are a combination of public and private cloud offerings. They
enable the organization to retain direct local control over critical data while continuing to
offer the advantage of the economies of scale available through a public cloud for services
that are not critical. For example, a single application such as email systems can span
through both realms by linking an on-premise email infrastructure with a public cloud
service for continuity. This can help organizations reduce the total cost of IT operations
while still meeting their security and regulatory requirements.

Public-private cloud trade-off


Exclusive Anyone

Service access
Private cloud Public cloud
Service control/ownership
Enterprise Third party

Cloud adoption in India 35


Features of various cloud-deployment models
Trade-off factors for both public and private clouds

Deployment model Managed by Owner Location Users Most suitable for:


Public Third party Third party offsite Untrusted users • Start-ups/SMBs
• Low level of customization
• Higher degree of tolerance for SLAs and
data security
• Access to a wider audience
• Preference for OPEX IT spends
Private Organization or Organization Onsite Trusted • Mature enterprises
third party or third party • High degree of customization
Offsite • Mission-critical applications with low
level of tolerance for SLAs and data
security
• Sufficient funds to invest in a private
cloud
Hybrid Both organization Both Onsite Trusted and • Enterprises can adopt a private cloud
and third party organization Untrusted to support mission critical applications,
and third party Offsite data and a public cloud for other
applications and data.

Accessing the cloud

A number of network options such as public internet, private dedicated lines or hybrid solutions (VPN) should be evaluated to select
the best-access option for the service. Performance and cost are among the parameters that are used to judge the network. Indian
ISPs currently provide high-speed broadband ranging from 100Mbps for public internet to Ethernet-based WAN 10Gig-Ethernet of
dedicated internet access for enterprise customers. Network options such as VPN provide enterprises with the same capability that
private leased lines traditionally deliver, but with cost savings enabled through the use of shared networks. Virtual private cloud is
built on the concepts of VPN, providing enterprise-level security to resources deployed on the vendor’s public cloud platform.

36 Cloud adoption in India


Internet access methodologies and features
Public internet Leased lines VPN
Advantages • Cost-effective solution • Ensured levels of data security • Security is comparable to leased
• Highly accessible due to • Access to better bandwidth and lines.
ubiquitous nature speed • More cost-effective solution as
• Greater customer market • End-to-end SLA ensuring compared to leased lines
guaranteed quality of service and • Scales easily
features • Accessible
• Almost error-free data exchange • High quality of service and
performance contractually
ensured through SLA
• Predictable support for business-
critical applications sensitive to
network congestion
Disadvantages • Security concerns • Not - cost-effective • Dependency on a single provider
• Quality of service not guaranteed • Not easily scalable • Investment in some hardware
• Lack of enterprise-level SLA • Expensive to build equipment to implement VPN
• Use of less secure protocols such • Expensive to maintain • Quality of service not as high as
as HTTP that of leased lines
• Prone to disruption due to routing • Less cost-effective than public
issues and cable cuts internet
Suitable for • Startups, SMBs • Not a cost-effective solution in • Large enterprises
• Non-critical applications most scenarios; can be evaluated • Critical applications and data
for private cloud

Cloud adoption in India 37


Appendix F: benefits of implementing
cloud IaaS services
The potential benefits of a well-designed and well-executed cloud-computing
infrastructure services strategy can be significant. The relative importance of each benefit
varies considerably with the size of the enterprise. Key benefits include:

Lower costs: The combination of reduced capex with a pay-as-you-use model effectively
changes the profile of IT expenses from capex to OPEX.

Data centers currently account for around 30–45% of enterprise IT costs. Data center
capacity is usually provisioned for close to peak-capacity utilization, while actual
utilization varies between 15–45%. Apart from the direct costs of setting up the data
center, the actual running costs almost double the actual cost on a per server basis. This
is primarily due to high overheads arising from power and cooling requirements. The
cloud model eliminates the overheads with the pay-as-you-use model and the dynamic
allocation of resources based on actual demand. Public clouds are also most likely to have
infrastructure with higher processing capacity, which translates to lesser time to run
compute-intensive applications.

Provisioning and utilizing data centers

100% utilization
100%

Planned utilization
80%

Overheads that
can be eliminated
60%
using cloud

40%
Actual utilization

20%

0%
5 years

38 Cloud adoption in India


On-demand self-service model: The on-demand self-service model of cloud IaaS services
essentially implies that a consumer can unilaterally become self-sufficient in provisioning
computing capabilities such as server time and network storage without requiring human
interaction. This ease of deployment is a major advantage to a line of business that faces
roadblocks from the IT department in taking innovations to market. Access to resources
in traditional IT involves hierarchical channels, which results in lower speed and ease
of deployment as compared to the cloud, where hardware capabilities are offered as
transparent, on-demand self services. The end impact is IT infrastructure that is extremely
responsive to business and an increased pace of innovation.

Low entry barriers: Cloud computing reduces the barriers to entry because infrastructure
is rented rather than purchased. With minimum upfront capital investment, even firms
with lower IT hardware budgets can leverage the scale and capability of the cloud provider
to build applications on the latest technologies. To the SMB enterprise, cloud IaaS services
extend the benefit of minimizing start-up costs by making available much of the required
computing capacity easily. For the SMB segment, this becomes the primary driver for the
adoption of cloud IaaS services.

Elasticity and scalability of resources: The capabilities available for rent appear to be
infinite and can be purchased in any quantity at any time — an application never “goes
down” due to the inability of infrastructure to scale up to demand. Computing resources
can be rapidly and elastically provisioned to quickly scale up and rapidly released to swiftly
scale down. The capability to provide and use multiple systems simultaneously for high-
process computing needs also has the potential to significantly reduce overall time to
complete operations.

Cloud adoption in India 39


Appendix G: challenges in shifting to
a cloud IaaS model
Data security and privacy is the most often cited area of concern around the
implementation of cloud computing. Security issues arise mainly due to the dependence
on an external service provider and sending potentially sensitive data out of the enterprise
data center. Some of the anticipated challenges are generic to any outsourcing scenario,
while others are unique to the cloud services provider. Overall, the challenges that
enterprises anticipate when transitioning to cloud include:

• Data security and privacy issues: As compared to a more traditional IT outsourcing


arrangement, cloud-computing clients do not have dedicated servers. This raises
concerns around where exactly client data exists and under whose jurisdiction it resides
at any single given point.
• Legal and regulatory compliance: Many companies have to follow a number of
regulatory compliance laws. Some firms have regulations, which do not allow their
data to cross national boundaries. The data-handling regulations require the ability
to track changes and follow audit trails. In cloud, there is a perceived compliance and
operational risk of dependence on the vendor. A well-developed compliance and risk
mitigation strategy by the service provider will help mitigate this risk.
• Control and responsiveness: With in-house IT functions and employees reporting
directly to in-house executives, there is little question about who should be doing what
and when. However, when employees and servers are separated, the provider’s and
executive’s priorities may not be aligned.
• Lack of benchmarking or leading practice experience: Because the use of off-site
computing capability is relatively new, there is insufficient experience from which to
draw guidance for companies looking to build an effective cloud computing strategy.
For example, there is some uncertainty on how to plan cloud capacity to meet the
existing performance requirements of current applications, or how to factor in current
architecture into cloud servers.
• Ambiguity over how best to quantify, track and communicate the benefits of
cloud computing
• Threat of potential over reliance on a single-source IT provider: The relatively
easy turnkey nature of cloud computing and its subsequent attraction of cost
reduction may promote a company’s gradual overdependence on a particular
third-party service provider.
• Lack of interoperability: There are no prevalent standards for vendor interoperability.
This gives rise to fears of vendor lock-in among the enterprise.
• Resistance from datacenter IT personnel: Current datacenter operations personnel
may resist the adoption of cloud computing at present, owing to the fear of losing their
jobs. The adoption of any new technology requires a change in mindset and culture of
the organization.

40 Cloud adoption in India


Appendix H: cloud enabling technologies: virtualization
Virtualization is the technology that makes cloud computing a reality. Shared resources are
made available on demand through memory, storage and network abstraction enabled by
virtualization, thereby allowing multiple operating systems to run on a single physical system.
The virtualization of servers and storage helps improve hardware utilization dramatically,
from 15–20% to 75–80%. An added advantage is reduced expenditure on cooling and power.
Virtualization and the dynamic data center

Automation

Application Application

Cloud computing
Management Management Management

Virtualized Virtualized Virtualized Virtualized


infrastructure infrastructure infrastructure infrastructure

Hypervisor Hypervisor Hypervisor Hypervisor Hypervisor

Port test and Save capital Capacity on Save OPEX Dynamic


development expenses demand expenses datacenter
environment

Survey response: is virtualization a key enabler of cloud technologies?

Survey highlights:

• Of the total respondents surveyed, 84% perceive virtualization to be a key technology in


enabling public or private-cloud creation.
• Out of the 84% who believe virtualization is a key enabler, 12% are currently using
virtualization, 20% plan to adopt virtualization within a year, while 40% are looking to
adopt virtualization in the next one to three years.
Perception of virtualization as a key enabler of cloud services

48%

No 16% 84% Yes 14%


5%

10% 24%

Currently using In the next one to three years In the next three to five years In the next year Not sure

Cloud adoption in India 41


Appendix I: About the study
This report is an outcome of a primary survey Ernst & Young conducted in
January - March 2010. The primary respondents were CIOs belonging to both large
enterprises and the SMB segment. Participant profile, awareness and perception of cloud
IaaS services, expected benefits and challenges of adoption and outlook were among the
areas the survey covered. The respondents were representative of all industry sectors.

42 Cloud adoption in India


Sources
• “Perspective 2020,” NASSCOM report, May 2009.
• “About us,” NetMagic website,
http://us.netmagicsolutions.com/company/corp_overview.html,
accessed September 2009.
• “Mi™ Platform,” July Systems website,
http://www.julysystems.com/mi_channel/mi_platform.html,
accessed September 2009.
• “BT selects 3Tera AppLogic,” 3Tera website,
http://www.3tera.com/News/Press-Releases/Archive/BT-Selects-3Tera-AppLogic.php,
accessed September 2009.
• “Eli Lilly on what’s next in Cloud Computing,” InformationWeek website,
http://www.informationweek.com/cloud-computing/blog/archives/2009/01/whats_next_in_t.html,
accessed September 2009.
• “What you need to know about Cloud Computing,
A Real-World Example: Animoto,” PCMag website,
http://www.pcmag.com/article2/0,2817,2330239,00.asp# ,
accessed September 2009.
• “CyberGamer Beats the Boss and Conquers the Cloud,” Rackspace website,
http://www.rackspacecloud.com/blog/2009/07/02/cybergamer-beats-the-boss-and-conquers-the-cloud/,
accessed September 2009.
• “About AWS,” Amazon Web Services website, http://aws.amazon.com,
accessed September 2009.

Cloud adoption in India 43


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